Japan to Join Trade Talks as Abe Defies Key Voting Bloc

By Isabel Reynolds and Takashi Hirokawa -
Mar 15, 2013

Prime Minister Shinzo Abe said
Japan will join negotiations on an American-led regional trade
accord opposed by some of his core supporters as he seeks to
boost growth and strengthen ties with the U.S.

“We are watching the birth of an economic zone that will
account for about a third of the world’s economy,” Abe said at
a press conference in Tokyo yesterday. “If Japan alone remains
inward-looking, it will have no opportunities for growth.
Companies will not remain here and talented people will not want
to work here.”

Abe’s decision, four months before elections to the upper
house, risks alienating farmers who have traditionally backed
his Liberal Democratic Party and fear being harmed by a free-
trade deal. Abe is pursuing deregulation to help boost Japan’s
international competitiveness and the trade pact may help
companies like Nissan Motor Co. (7201) compete with rivals from South
Korea, which already has a free trade deal with the U.S.

“Abe wants to use these talks to promote structural reform
in Japan, help exporters and boost domestic productivity, but
it’s a risky move because he is taking on a powerful interest
group,” said Jeff Kingston, the director of Asian Studies at
Temple University in Tokyo. “But with 70 percent approval
ratings he has leverage to twist arms in the LDP.”

GDP Boost

Japan’s participation would boost its gross domestic
product by 0.66 percentage point or 3.2 trillion yen ($33
billion) if it abolished all tariffs, according to a government
statement released yesterday.

Abe’s move comes less than a month after he and President Barack Obama agreed that pledging to abandon all tariffs wasn’t
a precondition to joining the talks. Obama has been pressing
successive Japanese governments to join the 11-nation talks that
aim to lower tariffs, strengthen patent protection and improve
access to government contracts. At the same time, U.S.
automakers have opposed Japan’s participation unless it eases
market barriers they say restrict American sales.

Acting U.S. Trade Representative Demetrios Marantis said
the U.S. “welcomes” Abe’s announcement, while noting that
“important work remains to be done” in consultations with
Japan in areas including the automotive and insurance sectors.

“We look forward to continuing these consultations with
Japan as the 11 TPP countries consider Japan’s candidacy for
this vital initiative,” Marantis said in a statement. “We will
continue to consult with Congress and stakeholders as we
proceed.”

Unfairly Closed

Representative Sander Levin of Michigan, joined by 46 other
Democrats, said in a letter to Obama that the automobile import
market in Japan is unfairly closed to U.S.-made vehicles, and
letting the nation join the regional trade deal would hurt
rather than help address that imbalance.

Abe came in to office in December pledging to revive the
world’s third-largest economy through aggressive monetary and
fiscal stimulus to end deflation. Another component of his plan
is reducing regulations to increase corporate investment and
hiring, and joining the TPP could aid these aims, analyst Jun Okumura said.

“It serves as a form of outside pressure on the process as
the Abe administration tries to implement deregulation,” said
Okumura, a senior adviser to the Eurasia Group in Tokyo and
former Japanese trade ministry official who took part in the
Uruguay Round of world trade talks in the 1990s. “Japan needs
to take part in these pacts with its partners and competitors.”

Possible Delays

Japan may not join the talks immediately as it took Mexico
and Canada a year to gain permission from existing members after
announcing they wanted to be part of the TPP negotiations. The
other countries are the U.S., Australia, New Zealand, Vietnam,
Singapore, Malaysia, Brunei, Peru and Chile.

Abe’s immediate predecessors, Yoshihiko Noda and Naoto Kan,
failed to push through a decision to take part in the
negotiations, due to opposition from their Democratic Party of
Japan. Abe also faces opposition inside his own party.

“I cannot agree to negotiations that will abandon Japan’s
food security, our ability to feed ourselves,” said ruling
party lawmaker Hiroshi Imazu, whose constituency is on the
northern island of Hokkaido, the country’s second-largest rice-
producing area. “I don’t think we will be able to withdraw from
the negotiations once we join.”

Japan imposes tariffs of 778 percent on rice imports, 328
percent on sugar and 218 percent on powdered milk. Eliminating a
38.5 percent tariff on beef would probably spur a jump of as
much as 40 percent in imports and help exporters including the
U.S. and Australia displace half of local produce, according to
Tetsuro Shimizu, a general manager at Norinchukin Research
Institute in Tokyo.

‘Sensitive Products’

“We will pay special attention to sensitive products and
it is a matter of course that we will make the utmost effort to
minimize the effect on them,” Abe said yesterday.

Government estimates released yesterday show a trade deal
could cut production of agricultural and marine products by 3
trillion yen, a prospect that sparked anti-TPP demonstrations by
agriculture cooperatives in Tokyo. LDP Secretary-General Shigeru Ishiba vowed at a rally this week to protect rice.

Abe said this week in parliament he was confident he could
overcome dissent within his party, which holds its annual
convention tomorrow.

“Once we have made a decision based on our discussions, we
will work together,” he said March 12.

Insufficient Explanation

A March 11 poll by the Tokyo Broadcasting System showed
that while 50 percent of respondents agreed Japan should join
the TPP, 82 percent expressed concerns. Almost 85 percent said
the government had not sufficiently explained the deal’s merits.
The survey of 1,200 people had a margin of error of 2.8 percent.

The same poll showed Abe’s support at above 75 percent,
which will probably keep the LDP unified in the face of an anti-
TPP backlash, said Risaburou Nezu, a former trade negotiator and
now a senior fellow at Fujitsu Research Institute.

“Abe is very popular, so there is no point in leaving the
party,” Nezu said. “Abe knows this, which is why he can be
decisive. LDP lawmakers have no choice but to go along with
it.”

For Abe, the TPP is not just about the economic effects.
“Japan will form a new economic zone with its ally, the U.S.
and the countries that join will share the values of freedom,
democracy, basic human rights and the rule of law,” he said
yesterday in Tokyo.